These Startups Are Using Blockchain To Change Digital Banking In India

In 2016, over 32 blockchain firms were founded in India, according to audit and consultancy firm PwC. (Photo courtesy: Shutterstock)

After years of talk and hype, Indian banks are slowly taking the first steps toward moving a significant piece of financial infrastructure onto a so-called blockchain -- the engine that drives the cryptocurrency Bitcoin. Last October, ICICI Bank carried out India’s first international trade transaction and overseas remittances using blockchain. Since then YES Bank, Kotak Mahindra Bank and Axis Bank have also started harnessing the technological concepts underlying Bitcoin.

Financial institutions around the world have long been fascinated by blockchain technology -- created by a network of computers, where each transaction made has a digital signature that cannot be forged -- as it introduced a new way of executing and recording financial transactions without a central authority. Over the past two years, startups have begun throwing their weight around blockchain technology vying with giant Indian IT service providers such as Infosys and TCS, to create core banking platforms.

Primechain Technologies, a one-year-old startup, has created a Bankchain for banks to explore, build, and implement blockchain solutions in areas such as anti-money laundering, cross border payments, asset registry and syndication of loans. “Blockchain technology has gained traction in the banking sector in India,” says Rohas Nagpal, cofounder of the company.

“In a year, we managed to have 24 members, including State Bank of India. We hope to grow to 750 members by 2019,” he adds.

Blockchain is disruptive

For running background checks on clients -- the know-your-customer checks -- Signzy, a two-year-old startup, is using blockchain with artificial intelligence to enable banks to authenticate and identify a person in a few hours. “Blockchain is disruptive for sectors that rely on chains of consent and lead to massive paperwork, such as financial services. Real estate and logistics will also benefit as well,” says Ankit Ratan, cofounder of Signzy, which has 28 clients, mostly in financial sectors.

In 2016, more than 32 blockchain firms were founded in India, according to audit and consultancy firm PwC. Apart from Primechain and Signzy, MindDeft Technologies, Sofocle, Trestor, KrypC and Hashcove are some startups designing and creating end-to-end blockchain solutions in India.

Since blockchain's secure, decentralized and tamper-proof ledger addresses renders intermediaries obsolete, and makes payments nearly instantaneous and at very low cost, banks are exploring it for a range of operations like cross-border remittances, for instance. That is presumably why the Reserve Bank of India (RBI) has signaled a favorable view saying blockchain will help the country’s banking sector. In January, the RBI’s research arm, the Institute for Development and Research in Banking Technology, said it can bring cost savings, efficiency, and transparency to the banking industry. Given the “sound basis underlying the technology, the advantages to be had by its adoption [...] we recommend that the time is ripe for its adoption in India,” the report stated.

Minimize fraud and maximize efficiency

Though viewed as a disruptive technology, blockchain is still linked in the minds of many with bitcoin. “Some confuse bitcoin and blockchain, however, most businesses are aware of the distinction between the blockchain technology and the cryptocurrencies; permissioned and permission-less blockchains and private and shared blockchain solutions,” says Nagpal. Creating more layers in the distributed ledger technology, says Ratan, will make it highly secure.

“Although there is nothing inherently wrong with cryptocurrencies, layers can be built around this technology to enable the same kind of trust that we see in today's physical cash world, and bring down risk. Going forward, AI and blockchain will be detecting fraud to the greater digital financial world,” says Ratan.

Since the perceived prevalence of fraud in India is the third highest -- at 80% -- in the world, according to the Global Fraud Report 2015-16, Nagpal says it’s imperative to use blockchain. “Blockchain can minimize fraud and maximize efficiency, security and transparency not just in financial services but also in supply chain management, healthcare, voting, electronic record authentication and much more.”

In India, blockchain has attracted interest from within the government as well. “We are having preliminary talks with government agencies to explore blockchain technology to record land registries,” says Nagpal. Creating and maintaining incorruptible registers of land titles is a huge -- and mostly unsolved -- problem In India.

Yet, despite its efficiency gains, not many have actually implemented it. According to PwC, 56% of the companies said blockchain is a part of their innovation strategy. The technology is still in its early days, says Ratan. “Although we are seeing a lot of interest for experimentation, or conceptual building but the complete transformation of current processes will take more time, at least three more years.”

But the fact that financial community is exploring the potential utility of blockchain is indicative that this technology is here to stay.

I am interested in ideas and enterprises -- in all shapes, sizes and guises, whether well-cooked or medium-rare. After working for most of my career in Dubai in different newspapers, including Gulf News, I relocated to India and worked for The Times Group in Pune. During my ...